Adjacency and Common Conveyor Insufficient to Imply Inclusion in a Restrictive Covenant

by Eric Christianson

Walters v. Colford
Nebraska Supreme Court, July 28, 2017

The Adamy subdivision was platted and dedicated in 1976. It contains 14 lots created from a 16.5 acre section of Daniel Adamy’s much larger property. When the founding documents were filed with the Butler County register of deeds, the plat and dedication included restrictive covenants. These covenants, among other things, limited the structures on the lots to one single-family, two-story house and one two- or three-car garage.

In 2013, the Colfords purchased 5 acres of property from Adamy adjacent to the pre-existing subdivision. When Adamy sold the property to the Colfords, the property was not subject to any restrictive covenants. After the sale, Adamy and Colford negotiated and agreed to new restrictions, which were different from those in place on the Adamy subdivision.

The Colfords constructed a large metal building on the property to store building materials to build a house on the property. Residents of the Adamy subdivision brought suit against the Colfords claiming that they had violated the subdivisions restrictive covenants.

They argue that the Colford property is subject to the subdivision’s covenant restrictions through the doctrine of implied reciprocal negative servitudes. This doctrine allows for restrictive covenants (i. e. reciprocal negative servitudes) to be applied to a specific piece of property in certain cases, even if the covenant was not recorded on that property. This principle has generally been used by the courts to apply covenant restrictions when all parties understood there to be a covenant in place, but it was not properly recorded.

The Court summarized the six factors that must be present for an implied restrictive negative servitude:

(1) There is a common grantor of property who has a general plan or scheme of development for the property; (2) the common grantor conveys a significant number of parcels or lots in the development subject to servitudes (restrictive covenants) designed to mutually benefit the properties in the development and advance the plan of development; (3) it can be reasonably inferred, based on the common grantor’s conduct, representations, and implied representations, that the grantor intended the property against which the servitude is implied to be subject to the same servitudes imposed on all of the properties within the plan of development; (4) the property owner against whom the restriction is enforced has actual or constructive notice of the implied servitude; (5) the party seeking to enforce the restriction possesses an interest in property in the development that is subject to the servitude and has reasonably relied upon the representations or implied representations of the common grantor that other properties within the general scheme of development will be subject to the servitude; and (6) injustice can be avoided only by implying the servitude.

In this case, the Court found that the Colfords are not subject to the restrictive covenants in force in the Adamy subdivision. There is a common grantor of the property, and the property is adjacent to a number of properties subject to covenants; however, the grantor’s conduct did not indicate that he intended the property to be subject to the same covenant. In fact, he had negotiated a different set of restrictions to apply to the land. Further, although the Colfords were aware that a covenant was in place on the adjacent properties, they never had any reason to believe they would be subject to the same covenant. Finally, the residents of the subdivision have no reasonable expectation that adjacent property outside the subdivision will be restricted in the same way that their properties are.

The purpose of the doctrine of implied reciprocal negative servitudes is not to guarantee that additional land can be made to comply with restrictive covenants. Instead the doctrine has long functioned to remedy a procedural error by the conveyor of the property:

The doctrine of implied reciprocal negative servitudes functions as a gap-filler […] Where a property owner purchases a lot from a developer that is subject to a restrictive covenant in the individual lot deed, but where the developer subsequently conveys a lot within the development without a restriction in the deed, the doctrine steps in to fill the gap. It fills the gap in order to protect the other property owners’ reasonable expectations that all of the lots within the plan of development will be similarly restricted.

The Court explains further that this doctrine may be less commonly applied in the future. Today developers generally place restrictions on an entire development at once through executing and recording a declaration of restrictions. That was the case with the Adamy Subdivision. It is rarer today for properties to be restricted on a deed-by-deed bases as they are sold. This leaves less room for errors to be corrected or gaps to be filled.

Exemption to zoning overlay district did not constitute special legislation

by Andrea Vaage

Dowd Grain Co. v. Sarpy County
Nebraska Supreme Court, August 14, 2015

In March 2004, Sarpy County enacted a zoning overlay ordinance that imposed design guidelines and other regulations along a specified road corridor. In 2007, this ordinance was amended to exempt land that was platted before the enactment of the ordinance in 2004. Dowd Grain Company owned land subject to the overlay ordinance but did not qualify for the exemption. Dowd Grain filed a declaratory judgement action against the County. It claimed that the exemption was unconstitutional because the ordinance was special legislation. It argued that its property was similarly situated to the exempted land and that the exemption proffered special privileges on the exempted land.

As with other challenges to municipal ordinances, the burden falls to the challenger to prove a zoning provision is unconstitutional. The ordinance must be shown to be unreasonable, arbitrary, or discriminatory and that the provisions bear no relation to the purpose of the ordinance. Special legislation cases are determined to fulfill these requirements if the legislation creates a permanently closed class or an arbitrary and unreasonable method of classification. The district court ruled in favor of the County on all counts, whereupon Dowd Grain appealed.

The first question under review was whether the overlay ordinance created a closed class. A closed class is one that cannot expand in number due to future growth or development. Dowd Grain argued that its property cannot be added to the exempted class and no property beyond the geographical limits of the overlay district can be added. However, Nebraska case law has established that property owners in a geographic area cannot create a closed class because real property is alienable and subject to constant change, including division. The number of parcels could change and new members could join the class by a change in ownership of property.  Dowd thus failed to prove the ordinance created a closed class.

The second issue was whether the class created by the ordinance was arbitrarily selected and served no real public interest. Those exempt from the ordinance were property owners who had submitted a plat application before March 2004. Submission of a plat application requires considerable expense and planning. It was not unreasonable to exempt property owners who had submitted a plat before the implementation of the design guidelines in the overlay district because these owners expended time and money to develop their property based on previous guidelines. The submittal of a plat application was a reasonable distinction between those property owners exempted from the ordinance and those subject to it. The ordinance, therefore, did not create a special class.

The district court ruling in favor of the county was affirmed.

 

 

 

 

Classification of land as “urban,” “suburban,” or “rural” for annexation purposes is question of law

by Gary Taylor

SID No. 196 of Douglas County v. City of Valley
Nebraska Supreme Court, February 6, 2015

Valley, Nebraska is a city of the second class located between Omaha and Fremont. Cities of the second class are permitted by state law to annex contiguous or adjacent lands that are urban or suburban in character and not agricultural lands that are rural in character.

In November 2010 the Valley City Council passed three ordinances to annex three different areas near Valley. The subject of this litigation was Ordinance No. 611, which annexed six different areas near the city. One of these areas, commonly known as Ginger Cove subdivision, contained Sanitary Improvement District (SID) 196. The area is almost completely developed, with 155 residential homes surrounding a sandpit lake. At the time Ordinance 611 was adopted it did not share any common borders with Valley, but did share borders with two other areas being annexed under Ordinance 611. The other areas subject to Ordinance 611 contained residential developments, and operating and exhausted sand and gravel mines (owned by Lyman-Richey (L-R)), and were developed to varying degrees.

In 2006 SID 196 and L-R entered into an agreement with Valley, agreeing to pay the city for the cost to construct a lift station and force main to route wastewater from the properties to the regional pumping station in the city. SID 196 and L-R reserved the capacity for 233 residential lots to use the wastewater system, in contemplation of the development of a residential community. Valley took out $4.5 million in bonds to finance regional pumping stations and the force main to move wastewater to the treatment facility in Fremont, and charges the subdivision residences a fee for use of the sewer system.

Prior to Ordinance 611, the area to be annexed was served by fire and paramedic services from Valley. The Douglas County Sheriff provided police services with Valley Police Department as secondary responder. Snow removal was conducted by Douglas County. Valley would assume all provision of services after the annexation.

SID 196 challenged Ordinance 611, alleging that (1) some land within the subdivision (where SID 196 operates) is not urban or suburban in character; (2) it fails to meet the contiguous or adjacent requirement, and (3) the area was annexed for an improper purpose.

Character of area. In the trial court, the experts for the two sides agreed on the physical nature of the land, how it is being used, the number of residences, and all other facts regarding the area; however, they came to different conclusions about how the land should be classified under the statute. The Nebraska Supreme Court noted that the issue of how the land should be classified is a question of law. The question of law is one for the court to decide. The fact that the experts came to two different legal conclusions based on the same set of facts does not create “a material issue of fact” which would be required to defeat summary judgment.

SID 196’s expert determined that the property was not urban or suburban because the property was being used for mining operations, and because the property was zoned transitional agriculture. The Court disagreed. Mining has traditionally never been considered an agricultural use of property. L-R’s actions prior to Ordinance 611 indicated that the properties would eventually be used for residential development. Furthermore, zoning does not dictate the ability to annex. The Court found no merit to the claim that the land in question was agricultural and rural in character.

Contiguous or adjacent. Generally, a municipality may annex several tracts as long as one tract is substantially adjacent to the municipality and the other tracts are substantially adjacent to each other. SID 196 argued that the present circumstance was a case of “strip annexation” – annexing a strip of land in order to reach a larger parcel – which the Nebraska courts have disfavored. The focus of strip annexation court cases is on the extent to which the city shared a border with the land to be annexed; it is not solely on the shape of the tract to be annexed.

SID 196 argued that the annexation of a large, largely undeveloped parcel, to connect a large, developed parcel was strip annexation, but the Supreme Court found no authority to impose a “community of interest” requirement on an annexation. The annexation as a whole – looking at all parcels together – met the contiguous or adjacent requirement of the statute.

Purpose of annexation. Case law in Nebraska is clear that it is improper for an annexation to be solely motivated by an increase in tax revenue. SID 196 argued that Valley was motivated by SID 196’s extremely low debt, and pointed out that another SID was not chosen because it had a much higher level of debt. The Supreme Court said that debt level has no relation to raising tax revenues. Valley was motivated, at least in part, to equalize the burden among city residents and SID 196 in financing the recent sewer system improvements. It would be “fiscally irresponsible” for the city not to at least take debt levels into consideration before annexing territory.

 

Private covenants requiring improvements to be harmonious with surrounding structures are not per se ambiguous

by Hannah Dankbar

Curtis Acres Association v Stephan Hosman
Nebraska Court of Appeals, January 13, 2015

Hosman began construction of a boathouse in Douglas County, Nebraska. Curtis Acres Association manages the properties where Hosman’s property is located. The Association filed suit against Hosman asking the court to make Hosman stop construction and remove the boathouse because he was violating multiple restrictive covenants.

Before Hosman bought his property in the Curtis Acres subdivision in 1990 the Association had filed a “Declaration of Covenants, Conditions, Restrictions and Easements” (CCR). Part of this document requires residents to get pre-approval of any improvements on their lots. Hosman submitted three sets of plans for his residence before being approved. The Association’s CCRs were amended four times subsequent to this. One of the amendments required residents to submit two plans in order to get approved and if approval was not granted within thirty days the plans were deemed disapproved. This amendment was added to ensure that future projects were in alignment with Nebraska law and with the master plan for the subdivision.

Three years after the amendment was added Hosman began construction of a boathouse on his lot, approximately 15 feet from the edge of the lake. The Association sent Hosman a letter telling him sought approval of his plans before beginning construction. Hosman submitted a one-page hand drawn picture of his boathouse. Hosman included dimensions, color and materials on the page, noting that the siding would be the same as on his residence and the roof was to be blue in color. The Association informed him that his drawing was insufficient, and that “a blue standing seam roof is not acceptable.”  The Association further informed him that “structures will be set back from the shoreline so as not to impede one’s neighbor’s views.  We suggest 100′.”  Hosman continued construction and in October 2010 the Association filed a complaint against him. In summary judgment the court found that the Association can enforce their covenants and required Hosman to stop construction.  Hosman appealed that ruling.

Hosman claiming that the court was wrong in deciding, “(1) that the covenants provide a clear, articulable standard for approval of building projects; (2) that the enforcement of the covenants against Hosman was reasonable; (3) that the Association did not have unclean hands in the administration of its covenants.” Hosman does not fight the fact that he is not obeying the covenant.

As for Hosman’s first argument, the Nebraska Court of Appeals decided that the relevant covenants were not ambiguous and gave a ‘sufficient’ standard for approval. In Normandy Square Assn. v. Ells the Nebraska Supreme Court held that “restrictive covenants that permit a homeowners association to approve or disapprove improvements based on a standard of whether such improvements conform to the harmony of external design and location in relation to surrounding structures are not per se ambiguous; rather, such covenants are enforceable provided that the authority is exercised reasonable within the framework of the covenants’ stated purposes.” Following the ruling in Ells the court found that in this case the covenants are enforceable because the stated purpose is to “protect the value, character and residential quality of all lots.”  According to the court this statement does not create ambiguity and the Association had the power to disapprove the boathouse.

Next is the question of whether the authority was reasonable exercised. The Association decided that the blue roof did not meet the standards of the neighborhood, and the boathouse was too close to the shore. Hosman argued that there are other boathouses within 100 feet of the shore, so he should be allowed to have his that close as well. The Association allowed the houses to be that close before changing the rule. Since the rule changed no new boathouses have been built that close to the shore, and Hosman did not show that any of the other boathouses have blue roofs. The Association properly changed the rule, and properly enforced the rule once it had been changed.

Third, Hosman argued that the Association inconsistently enforced the covenants. The Association admitted that under extenuating circumstances there were two incidences where residents were given extensions on timeframes set forth in the covenants; however, the covenants themselves allowed for such a deviation.  The court found no merit to Hosman’s argument.

Lastly, Hosman argued that the Association treats him differently because they do not like him. There was evidence to this effect, including a letter one member of the Association sent to Hosman’s home containing derogatory comments and insinuations about Hosman’s character.  Hosman failed to demonstrate, however, any link between the actions of individual members of the Association expressing their dislike towards him and the decision making process of the Association as a whole.

The Court of Appeals affirmed the decision of the trial court to order Hosman to remove his boathouse from his property.

Elimination of median cut not a taking

by Gary Taylor

Buck’s, Inc. v. City of Omaha
(Nebraska Court of Appeals, November 25, 2014)

Buck’s, Inc. owns and operates a gas station on the northwest corner of the intersection of 144th Street and Stony Brook Boulevard in Omaha. In August 2009, the City eliminated a cut in the median on Stony Brook Boulevard that gave eastbound traffic access to the gas station. No access points to the gas station were eliminated. The city engineer testified that the decision to eliminate the median cut was made to address safety concerns associated with the anticipated increased traffic generated by a new grocery store in the area. The city’s right-of-way manager testified that the City did not acquire any property or property interest from Buck’s for this project, and affirmed that Buck’s had three entrances to its property prior to the project, and continued to have three entrances after project completion.

Buck’s nevertheless brought an inverse condemnation action against the City. A board of appraisers was appointed, and Buck’s was awarded $30,000. Both parties appealed to the district court, which entered summary judgment for the City. Buck’s appealed.

The Nebraska Court of Appeals noted that the right of an owner of property that abuts a street or highway to have ingress and egress by way of the street is a property right in the nature of an easement, and the owner cannot be deprived of such right without due process of law and compensation for loss. The court also noted, however, that “as to damages claimed by reason of a change in the flow of traffic by placing medians in the center of a street, [the damages] result from the exercise of the police power and are noncompensable as being incidental to the doing of a lawful act.” After the median cut was closed, Buck’s still had access to Stony Brook Boulevard. “The fact that left-hand turns are now restricted is but an inconvenience shared with the general public.” The Court of Appeals affirmed the district court.

Interpretation of ‘gap and extend’ law properly allowed extension of pavement to unpaved intersection

by Gary Taylor

Johnson v. City of Fremont
(Nebraska Supreme Court, April 18, 2014)

[Note:  The court includes a map of the area in question!  I wish the courts would include maps in their published opinions more often.  They make land use cases much easier to understand. I urge you to follow the link to the case to see the map.]

Neb. Rev. Stat. 18-2001 provides

Any city or village may, without petition or creating a street improvement district…pave any portion of a street otherwise paved so as to make one continuous paved street, but the portion to be so improved shall not exceed two blocks, including intersections, or thirteen hundred and twenty-five feet, whichever is the lesser  Such city or village may also pave any unpaved street or alley which intersects a paved street for a distance of not to exceed one block on either side of such paved street.

Known as the gap and extend law, the City of Fremont used the statute to pave one block of Donna Street and assess the costs to abutting landowners, including the plaintiffs in this case, Roland and Karen Johnson. The pavement extended the paved portion of Donna Street one block to the west, but stopped at the intersection of Howard Street, which is unpaved.

The City argued that the action “was the paving of an extension of Donna Street for one block from where it intersects Jean Drive, a paved street,” and was a proper application of the gap and extend law.  The Johnsons argued a narrower interpretation of the statute; specifically that the phrase “so as to make one continuous paved street” in the first sentence limits the statute’s application in all instances to circumstances where the pavement closes an unpaved gap between two paved streets.

The Nebraska Supreme Court sided with the City.  Concluding that the terms of the law are clear and unambiguous, the Court found that the statute’s second sentence clearly applied to the City’s extension of Donna Street.  “The first sentence [which included the language ‘so as to make one continuous paved street’] provides the power to fill a gap….The section sentence, empowers a city to make a single-block extension of paving from an intersecting street.  The Legislature used the word ‘also’ to make it clear that the second sentence provided an additional power beyond that granted by the first sentence….The [Johnson’s] interpretation would effectively eliminate the second sentence of section 18-2001.”

Owner of fourplex forfeited right to continue as nonconforming use when two apartments remained unoccupied for more than one year

by Rachel Greifenkamp and Gary Taylor

Rodehorst Brothers v. City of Norfolk Board of Adjustment

(Nebraska Supreme Court, March 28, 2014)

The City of Norfolk, Nebraska zoning code includes the following provision with regard to nonconforming uses:

In the event that a nonconforming use is discontinued, or its normal operation stopped, for a period of one year, the use of the same shall thereafter conform to the uses permitted in the district in which it is located.

The Rodehorst Brothers partnerships owns a fourplex in Norfolk an area zoned R-2 for one and two family use. The fourplex is a legal, nonconforming use. In 2010 and 2011 Rodehorst applied for building permits to replace a roof, fix some electrical issues, and remodel the apartments in the building. The first two were granted by the building inspector but the third (apartment remodels) was denied because the inspector concluded that Rodehorst had forfeited its right to continue its nonconforming use of a fourplex because several of the apartments in the building had been unoccupied for more than one year.

Rodehorst appealed the denial of the permit to the City of Norfolk Board of Adjustment (Board), and also requested that they grant a use variance to allow the building to continue operating as a fourplex. Rodehorst argued that simply failing to rent out the apartments did not cause a forfeiture of the right to operate as a fourplex, and that it had been trying to “fix up” the building for years.  Rodehorst also argued that it would suffer an undue hardship without the use variance.  The City argued that the right to operate the building as a fourplex was forfeited because the apartments were unoccupied for more than one year.  The City further argued that the Board did not have authority to grant a use variance because the zoning code defines “variance” as “relief from or variation of the provisions of [the zoning code], other than use regulations, as applied to a specific piece of property, as distinct from rezoning.” The Board agreed with the City on both arguments, and Rodehorst appealed the decision to the district court.

At the district court Rodehorst employed the same arguments but went on to say that the Board’s ruling was an unconstitutional taking. The district court, however, affirmed the Board’s ruling in all respects.

Rodehorst appealed the decision of the District Court to the Nebraska State Supreme Court using the same three arguments as when it appealed to the District Court.

Right to continue nonconforming use.  Nebraska Revised Statutes provides that, with regard to nonconforming uses for cities of the first class, “if a nonconforming use is in fact discontinued for a period of twelve months, such right to the nonconforming use shall be forfeited and any future use of the building and premises shall conform to the regulation.”  The Supreme Court first noted that the choice of the word “discontinued,” as opposed to “abandoned,” is important.  Abandonment requires not only a cessation of the nonconforming use, but also an intent by the user to abandon the nonconforming use.  Where a legislature or other zoning authority has used the word “discontinued”…instead of “abandoned” their purpose is ‘to do away with the need to proved intent to abandon.'”  This squares with the plain, ordinary meaning of the term “discontinue,”  and is consistent with the notion that nonconforming uses are disfavored because they reduce the effectiveness of the zoning ordinance, depress property values, and contribute to the growth of urban blight.

Rodehorst argued that the nature and characteristics of the building control; in other words, that the building is and always was divided into four separate living units.  The Court disagreed. After reviewing cases from several other jurisdictions, the Court concluded that

The degree of occupancy is the critical factor in determining whether a multifamily dwelling nonconforming use remains in effect, while the existing characteristics of the building (such as separate units and features) generally go to whether the user intended to abandon the nonconforming use.  As noted earlier, intent to abandon is not relevant because [Nebraska] zoning laws speak in terms of discontinuance….Thus, the degree of occupancy of the building is the central inquiry.

Noting that “this is not a situation where the discontinuance was involuntary” but rather that no effort had been made to rent the apartments for a number of years, the Court ruled that “a discontinuance period will run where the landlord did not really try to rent the premises.” Thus, the Court affirmed the district court on this argument.

Authority to grant use variance.  Citing the relevant provision of Nebraska Revised Statutes, which allows for the grant of a variance “when by reason of exceptional narrowness, shallowness, or shape of a specific piece of property…or exceptional topographic conditions” the Court denied Rodehorst’s argument for a use variance because the request was based on its desire to continue using its building as a fourplex, not because of any physical characteristic of its property.

Taking.  While acknowledging that discontinuance provisions may work a taking in some cases, the Court denied that such a claim could be sustained in this case.  Using the three-factor test from Penn Central, the Court concluded that (1) even assuming a 50 percent diminution of value, that level of loss generally does not equate to a regulatory taking; (2) Rodehorst bought the property when it was already a nonconforming use, and thus his reasonable investment-backed expectations should have been that he could continue it as a fourplex only so long as its use as such was not discontinued for a period of one year; and (3) the character of the governmental action – to gradually eliminate nonconforming uses over time – is a recognized good.

LaVista (NE) annexation not purely for revenue raising

by Gary Taylor

US Cold Storage, Inc. v. City of LaVista
(Nebraska Supreme Court, March 29, 2013)

In 1969, the owner of a 210-acre parcel in Sarpy County petitioned the Sarpy County Board of Commissioners to designate the tract as an industrial area and the board complied. Under Nebraska law an industrial area is land “used or reserved for the location of industry.” At the time of the designation, La Vista’s zoning jurisdiction did not reach any part of the parcel; therefore the city’s approval was not required. US Cold Storage acquired four lots in the industrial area in 1971 and has operated its business there since that time. Sanitary and Improvement District (SID) 59 was created in 1971 to provide utilities and services to the industrial area. The area of SID 59 is greater than, but includes, the entire industrial area.  In October 2009 La Vista resolved to annex SID 59. It sent written notices to the property owners within SID 59 of an October 22 city planning commission public hearing on the proposed annexation. On November 3, La Vista sent written notice to the property owners within SID 59 of a November 17 city council hearing also regarding the annexation of SID 59. On December 1, after conducting the public hearings, La Vista approved an ordinance purporting to annex SID 59 in its entirety.

On December 16, 2009, Cold Storage filed a class action complaint against La Vista and SID 59 challenging the validity of ordinance 1107. The complaint alleged that ordinance 1107 was invalid because (1) La Vista failed to comply with statutory notice requirements when adopting it, (2) the annexation was for revenue purposes only, and (3) state law prohibited the annexation of the industrial area in SID 59.

On January 18, 2011, while Cold Storage’s challenge to the validity of ordinance 1107 was pending in district court, La Vista directed its planning commission to consider the annexation of only a portion of SID 59; specifically, that portion that did not include the industrial area. On April 19, after giving proper statutory notice of this proposed annexation, La Vista adopted an ordinance (ordinance 1142) purporting to annex the portion of SID 59 that did not include the industrial area.  SID 59 filed a cross claim in the initial action, and asserted that ordinance 1142 was invalid.  The district court found in favor of La Vista on all claims, and Cold Storage and SID 59 appealed.

Statutory notice claim.  It was undisputed that the notices did not strictly comply with Neb. Rev. Stat. 19-5001 (one was 3 days late, another was 2 days early, along with  minor errors).  It was also undisputed that SID 59 had actual notice of the annexation proceedings.  In siding with La Vista, the court relied on Neb. Rev. Stat. 19-5001(5), which only voids annexation decisions on notice grounds if the errors are “willful or deliberate.”

Annexation for revenue purposes.  Caselaw in Nebraska proscribes annexation for revenue purposes only.  The court rejected the notion that because the SID was completely built out the city would be incurring no liabilities.  The court referred to La Vista’s required annexation plan, which identified the street and sewer improvements the city would become responsible for in the event of annexation, and the the additional police staff needed to patrol the area.  The city’s finance manager testified that the city would also assume all debts and obligations of SID 59, including approximately $2.1 million in net bonded debt.  The court concluded that although revenue was a factor, but other factors included the indebtedness which the city would assume, the city’s objective of orderly growth, and the perception that annexation of SID 59, which was already surrounded by the city, would improve the provision of services by eliminating jurisdictional issues.

Prohibition against annexation of industrial area.  Prior to 1991, Neb. Rev. Stat. 13-1115 only permitted the annexation of an industrial area under two circumstances (neither of which applied in this case); however, in 1991 the law was amended to allow annexation if the industrial area “is located in a county with a population in excess of 100,000 persons and the city did not approve the original designation of the tract as an industrial area.”  The court found that both conditions were met in this case.  Cold Storage contended that because La Vista could not have annexed the area prior to 1991, a vested right existed to continue the operation of SID 59 without annexation.  The court noted that the true nature of the vested right claimed by Cold Storage was the “benefit” of lower taxes accruing from not being subject to taxation by La Vista; however, the court cited numerous cases for the proposition that exemption from taxation is not a vested right.  “We find nothing in the language of the pre-1991 version of Neb. Rev. Stat. 13-1115 which would constitute a pledge by the Legislature that the circumstances under which property in an industrial area could be annexed would never be altered by an amendment to the statute.”

The Nebraska Supreme Court affirmed the ruling of the district court on all issues.

Owner of purchase option has standing to apply for variance in Nebraska

by Gary Taylor

Field Club Home Owners League v. Zoning Board of Appeals of the City of Omaha
(Nebraska Supreme Court, May 11, 2012)

Volunteers of America (VOA) proposed to build an apartment-style building for veterans in Omaha.  To construct the building as planned, VOA applied to the Omaha Zoning Board of Appeals (Board) for variances from area and use restrictions. The appellants, Field Club Home Owners League and Thornburg Place Neighborhood Association (Field Club) opposed the application. The Board granted the variances, concluding that the 1987 Code created an unnecessary hardship because it did not contemplate a project like VOA’s. The district court affirmed the Board’s decision, and Field Club appealed to the Nebraska Supreme Court.

Field Club argued that VOA lacked standing to request variances from the Board because VOA had not obtained a certificate of authority pursuant to Neb. Rev. Stat. 21-20,169(1), which provides that “[a] foreign corporation transacting business in this state without a certificate of authority may not maintain a proceeding in any court in this state until it obtains a certificate of authority.”  The Nebraska Supreme Court found the provision inapplicable because, although VOA is a foreign corporation, VOA was not “maintaining” a court proceeding. It was Field Club that petitioned the district court and named VOA as a defendant.

Field Club also contended that because the owner of the property was Kiewit Construction Company, and not VOA, that VOA lacked standing because it had no legally cognizable interest in the property. The Supreme Court noted that the majority of courts that have considered the issue hold that a prospective purchaser under a purchase agreement subject to the grant of a variance or rezoning has standing to seek the change. Similarly, courts have held that the holder of an option to purchase property has standing to apply for a variance when the holder is bound to purchase the property if the variance is obtained or when the property owner anticipated that the option holder would seek the variance to complete the sale.  The Supreme Court agreed with these other jurisdictions, and further noted that the principles hold true in administrative proceedings as well as judicial proceedings.

However, the Supreme Court noted that Field Club did not raise the issue of standing until the case reached the Supreme Court.  Partly as a result of this, the record did not contain evidence addressing VOA’s interest in the property.  Therefore, the Supreme Court remanded the case to district court to receive additional evidence and determine whether VOA had sufficient interest in the property to seek the variances.

Maps provided to landowner sufficiently accurate representation of land ultimately condemned

By Victoria Heldt

Krupicka v. Village of Dorchester
(Nebraska Court of Appeals, October 11, 2011)

Krupicka farms a 160-acre plot of land outside the Village of Dorchester.  The Village of Dorchester owns a wastewater treatment plant on the property adjacent to the northeast portion of Krupicka’s land.  In October 2008, the Village notified Krupicka that its wastewater treatment plant must undergo alterations and expansions in order to meet federal and state standards.  The letter specified that the expansion (new lagoons) would need to take place on a portion of Krupicka’s land and that the Village was prepared to negotiate a purchase agreement.  Krupicka met with the Village’s attorney (Gropp) regarding the acquisition in October 2008 and then in December of 2008 Krupicka received an official offer letter.  The letter informed Krupicka that the Village desired to purchase 40 acres of Krupicka’s land at $2,200 per acre.  The initial plan consisted of four new lagoons placed on a portion of land north of a creek that ran through Krupicka’s property.  Krupicka hired representation (Hemmerling) and requested a meeting with Gropp in order to discuss alternative plans.

In January of 2009 Krupicka met with Gropp and the project manager, who explained that the project required a 35-40 acre plot of land and needed to be finalized by September of that year.  Krupicka expressed concerns about his ability to use his pivot irrigation system on the land near the lagoons.  Another meeting was held in February of 2009 at which Krupicka suggested the lagoon site be moved to the south side of the creek running through his property.  After the Village’s superintendent of sewer, water, and electrical completed research regarding the alternative location of the lagoons, Krupicka received a letter stating it would not be feasible.  The letter, received in March 2009, included images of the acceptable future location of the lagoon and contained the following warning:  “Dimensions are approximate & will vary.  Area shown = 35.0 acres.”  Sometime shortly afterwards, Krupicka received a similar letter in which the area shown was equal to 36.7 acres.

Later that month Hemmerling, on behalf of Krupicka, sent a letter to Gropp rejecting the $2200 per acre offer and countered with a $10,000 per acre offer.  Gropp rejected this offer and countered with a $3,650 per acre offer “for the land in the northeast quarter of…Krupicka’s land.”  In August, Krupicka attended a Board meeting at which he requested a postponement of the decision regarding the lagoons.  The Board said it was not possible due to the September 1 deadline and reiterated its offer of $3,650 per acre.  Krupicka walked out of the meeting.  At the same meeting the Board authorized the condemnation of approximately 37 acres of Krupicka’s land on which to build three lagoons.  A witness at the meeting could not recall whether this took place before or after Krupicka left.  Gropp testified that he provided Krupicka with a copy of the final plan, but Krupicka claimed he never received it.  Gropp sent a “Petition for Condemnation and for Appointment of Appraisers” to Hemmerling.  Attached to this letter as a reference was an image of the plan included in the April 2009 letter to Krupicka and not the most recent plan.  Gropp said this was because he had sent his only copy of the most recent plan to Krupicka, and he provided one later that month to the appraisers.  The appraisers valued Krupicka’s damages at $160,000 (or $4,311 per acre.)  Krupicka later consented to a temporary construction easement for consideration of $8,500.

In district court, Krupicka alleged that the $160,000 was not adequate and that the condemnation of his property was invalid since there were no good faith negotiations prior to it.  The court found that the Village did indeed enter into good faith negotiations before condemning the property.  Krupicka appealed.  After clarifying that it does have jurisdiction to decide the case, the Court of Appeals addressed Krupicka’s claim.  At the heart of the claim, Krupicka argued that the good faith negotiation requirement was not met because he never received a legal description of the land to be condemned and therefore the condemnation was invalid.  In order to satisfy the statutory requirement of good faith negotiation, “there must be a good faith attempt to agree, consisting of an offer made in good faith and a reasonable effort to induce the owner to accept it.”  He did not want the land returned to him (as the treatment facility construction had already begun) but instead wanted more compensation.

Krupicka relied on Prairie View Tel. Co. v. County of Cherry as precedent.  In that case, the County of Cherry sought to condemn property in order to build a county road.  The only form of negotiation was a letter addressed to the landowners.  The letter informed them that since they failed to appear for negotiations as formerly requested and since the County was unable to find them at their home on one occasion, the County was offering $3,000 as consideration.  The Court held that an offer in good faith was not made since the county never discussed how much land it was going to take.

The Court noted that the facts in Prairie differed greatly from the facts in this case.  The Village indicated “with reasonable clarity” how much land was to be taken.  In addition, it sought Krupicka’s input regarding the location of the lagoons in the initial planning stages.  Although it was unclear as to whether Krupicka received the final draft of the plan for the lagoon, the other three drawings he did receive showed a portion of land that was in “essentially the same location as the portion of Krupicka’s land that was ultimately condemned.”  For these reasons, the Court affirmed the district court’s decision.

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